The economies of emerging East Asia will grow 7.5 percent as a group in 2006, drawing strength from a sustained, broad-based economic expansion in major industrial countries that are key export markets for the region, and a rebound in the global information technology industry, said Asian Development Bank (ADB) Tuesday.

"The region has adjusted well to a challenging first half characterized by high energy costs, persistent inflationary pressures, tighter monetary conditions, and financial volatility," says Masahiro Kawai, head of ADB's Office of Regional Economic Integration which released its new Asia Economic Monitor (AEM) report Tuesday.

"There was a revival of external demand in the first half of the year and domestic demand is also now strengthening in several economies. Together these factors will help drive growth in the second half," he said.

The year 2006 will be the third consecutive year of average GDP growth above 7 percent for emerging East Asia, which comprises the 10 ASEAN countries, China, including the Hong Kong Special Administration Region of China and Taiwan of China, and South Korea.

Together, these economies posted a 7.2 percent growth in 2005, and 7.9 percent growth in 2004.

Meanwhile, the AEM forecasts 6.9 percent growth for emerging East Asia in 2007 on an anticipated easing of growth in the United States, Japan, and China.

The outlook for China is a key element of the region's prospects, said the ADB report.

ADB forecasts GDP in China will grow a strong 10.1 percent this year and 9.0 percent in 2007. Importantly for the rest of emerging East Asia, China imports are expected to rebound from exceptionally low growth in 2005.

China's demand, with the global rebound in IT and improving domestic demand, is expected to propel growth in the three newly industrialized economies -- South Korea, Hong Kong of China and Taiwan of China. GDP growth in the NIEs is forecast at 5.1 percent in 2006, up from 4.5 percent in 2005, said ADB.

ASEAN economies can expect steady GDP growth of 5.5 percent in 2006, reflecting the stable external outlook, with slight variations up or down across economies, according to ADB.

ASEAN growth is forecast to rise slightly to 5.7 percent in 2007 as Indonesia recovers from the effects of its August 2005 mini-financial crisis, said ADB.

However, the broadly favorable outlook for the region is subject to two types of risks, said ADB.

Near-term cyclical risks would include a sharp fall in external demand, faster-than-expected correction of an overheating Chinese economy, higher-than-expected energy prices, and a significant deterioration in global financial conditions, according to ADB.

Deeper structural, low probability but high impact risks would include a sudden and disruptive adjustment of the global payments imbalances and the outbreak of an avian flu pandemic, said ADB.

Source: Xinhua